Jetha v Chhagan and Others (Civil Appeal No. 38 of 1955) [1955] EACA 312 (1 January 1955)

## COURT OF APPEAL FOR EASTERN AFRICA

Before SIR BARCLAY NIHILL (President), SIR NEWNHAM WORLEY (Vice-President) $\mathbf{C}$ and Lowe, J. (Tanganyika)

## GULAMALI JETHA, Appellant (Original Defendant)

## (1) JADAVJI CHHAGAN, (2) GOKALDAS CHHAGAN, (3) JAMNADAS CHHAGAN, Respondents (Original Plaintiffs) Civil Appeal No. 38 of 1955

## (Appeal from H. M. High Court of Tanganyika, Harbord, J.)

Landlord and Tenant—Rent Restriction—Building lease—Whether rent restriction legislation applies to building erected by lessee under a building lease-Considerations where tenancy agreement contemplates no specific user—Rent Restriction Ordinance, 1951 (as amended by Rent Restriction (Amendment) Ordinance, 1954), sections 1 (2), 2 (1), $2A$ and 32 (3).

By a building lease, the appellant leased some land at an annual rent and covenanted to erect buildings thereon, which he did, erecting three shops and a store. No specific use of the buildings was contemplated by the lease.

The main issue in the appeal was whether under the terms of such a building lease the premises are "let" to the lessee so as to make them "premises" within the Rent Restriction Ordinance, 1951.

Section 2A of the Ordinance was enacted by the Rent Restriction (Amendment) Ordinance, 1954, and this section and sections 1 (2) and 2 (1) are set forth in the judgment of Worley, V. P.

It was (inter alia) contended by the respondents that section 2A aforesaid, by implied repeal, had deprived the appellant from any protection he might have had, because the wording thereof being apt to cover the case of a lessee under a building lease who had covenanted to erect a dwelling-house, by implication excluded from the category of tenants, the lessee who had covenanted to erect buildings to be used for business purposes.

Held (10-8-55).—(1) Although, *ab initio*, there was no letting of any building, none then being in existence, as soon as the building was erected, the maxim quiequid plantatur solo, solo cedit applied, so that the lessee thereupon became lessee of both the land and the building.

(2) Upon the contractual tenancy being determined, the instant lessee held over the premises as statutory tenant.

(3) Where a tenancy agreement contemplates no specific user, the actual use of the premises at the time when possession is sought by the landlord must be considered.

(4) Section $2_A$ aforesaid does not cover a case where a tenancy exists. It is intended to protect licensees against eviction and extortionate demands in cases where a landowner gives licence to occupy a "house spot" on which the licensee erects a house of semipermanent construction.

Appeal allowed.

Cases referred to: Cole v. Lejeune, (1951) 2 T. L. R. 308; Simper v. Coombs (1948) 1 A. E. 306; Ellis and Sons Amalgamated Properties Ltd. v Sisman, (1948) 1 K. B. 653; Wolfe v. Hogan (1949) 2 K. B. 194; Remon v. City of London Real Property Co. Ltd., (1921) 1 K. B. 49; Skinner v G

$\mathcal{L} \leftarrow \mathcal{L} \leftarrow \mathcal{L}$

Murray for appellant.

O'Donovan for respondents.

SIR NEWNHAM WORLEY (Vice-President).—The issue raised in this appeal is whether, when a building is erected by a lessee under the terms of the type of lease commonly known as a "building lease", the premises in question are "let"<br>to the lessee so as to make them "premises" to which the Tanganyika Rent<br>Restriction Ordinance, 1951 (Ordinance No. 16 of 1951), as subsequentl amended, is applied by sub-section (2) of section 1 thereof. Or, to relate the issue more precisely to the facts of the instant case, whether, when the building so erected is used for trade, business or professional purposes, it is within the definition of "business premises" enacted in sub-section (1) of section 2 of the Ordinance.

The material facts are not in dispute except on one point to which I shall refer later. The appellant (defendant in the court below) and the respondents (plaintiffs) are all merchants carrying on business at Mwanza. In April, 1945, the appellant leased a certain parcel of land in Mwanza from the then owner for a period of ten years from 1st January, 1945, at an annual rental of Sh. 240. The demised land was unimproved and the appellant in terms of the lease covenanted to erect thereon buildings to a value of not less than Sh. 10,000 and he did, in fact, in or about the year 1946, erect thereon a building comprising three shops and a store, which is the building now in suit. It is not in dispute that at all material times the appellant has not been in actual occupation of the three shops or any of them: they are all let to his tenants, who carry on businesses therein. The one issue of fact in dispute is whether the appellant was at the date of filing suit in actual occupation of and using the store-room for business purposes. There is no suggestion that it was ever used for a residential purpose.

In January, 1947, the appellants, by purchase from the previous owner, became the registered owners of the land in question and thereby became entitled as joint tenants in fee simple by effluxion of time to the fee simple reversion of the land demised by the lease.

It was an express term of the lease that the lessee would not remove any buildings or other fixtures erected on the demised land during the continuance of the lease.

On 1st December, 1953, the respondents gave the appellant notice that they required him to quit and give them vacant possession on or before 31st December, 1954, of both the demised land and "of the building erected by you on the land," which will then become the property of our clients both at common law and under your covenant in that behalf in the said lease". A further gratuitous notice was sent and on 15th December, 1954, the appellant replied with a claim that the entire premises situated on the plot were leased to him by the previous owner and that as from 1st January, 1955, he would be the statutory tenant of the respondents, and as such entitled to continue to collect rents from the tenants of the shops. He offered to continue to pay the rent reserved under the lease.

The respondents thereupon lodged this suit claiming a declaration that they are entitled to the fee simple reversion of the demised land; and, inter alia, to receive all rents and mesne profits accruing in respect of or arising out of the said land and buildings; and that the appellant's right, title and interest therein terminated on 31st December, 1954. They further asked for an injunction restraining the appellant from collecting rents or otherwise interfering with their enjoyment of the premises, and for an account and other consequential relief. In these pleadings the respondents asserted and the appellant denied that it was an implied term of the lease that the lessee would deliver up to the lessor or ther successors the demised land together with the buildings or other permanent fixtures thereon; the appellant further pleaded that on the termination of the lease he became under the Rent Restriction Ordinance a statutory tenant entitled to remain in possession.

The first question before the High Court was whether the jurisdiction of that court was ousted by the provisions of the Rent Restriction Ordinance, 1951: this in turn depended upon whether the building in question was "premises to which the Ordinance applies" for, if so, the High Court was obliged to transfer the proceedings to the Rent Restriction Board, Mwanza (section 32 (3)). The learned Judge answered these questions in the negative holding, for reasons which I shall consider later, that the building was not "business premises let" and therefore not premises to which the Ordinance applied. It necessarily followed that he also found that the plaintiffs (respondents) were entitled to the reliefs asked for by the provisions of the Ordinance. Judgment for the respondents followed. The appeal is on the ground that the learned Judge erred in law in holding that the premises in question were not let to the appellant and that they were not premises to which the Rent Restriction Ordinance, 1951, applies.

It will be convenient at this stage to set out the relevant provisions of the Rent Restriction Ordinance, 1951 (which came into force on 27th February, 1951, and has been extended until 31st December, 1959), as amended by the Rent Restriction (Amendment) Ordinance, 1954 (No. 10 of 1954, which came into force on 27th April, 1954):—

> Section 1 (2).—This Ordinance shall apply to all $\ldots$ business premises situate in an area of the Territory in which a Rent Restriction Board has been established. . . .

> > (None of the exceptions apply to this case.)

Section 2 $(1)$ .—"business premises" means a building or part of a building let for business, trade or professional purposes. . .

"let" includes sublet and any arrangement deemed to be a letting under section 2A of this Ordinance;

"premises" means any dwelling-house or business premises as herein defined to which this Ordinance is applied by subsection $(2)$ of section 1 hereof;

"rent" includes any sum paid as valuable consideration for the occupation of any premises ... and any consideration deemed to be rent under section 2A of this Ordinance; "landlord" and "tenant" include any person deemed to be

a landlord or tenant under section 2A.

Section $2A$ (1). Subject to the provisions of sub-section (2) of this section, where pursuant to the permission of the owner of any land given in that behalf for valuable consideration any person (hereinafter in this section referred to as the licensee) enters on such land and builds thereon and occupies a dwelling-house, then, for the purposes of this Ordinance the licensee shall be deemed to be the tenant of such dwellinghouse and the owner of such land shall be deemed to be the landlord threof and the said consideration shall be deemed to be rent, and the provisions of this Ordinance shall, in all respects, apply as if such dwelling-house were let by such owner as landlord to the licensee as tenant.

Application to licences in certain cases. (2) The provisions of this section shall apply only—

- $(a)$ to an area to which the provisions of this section have been applied under the provisions of sub-section (3) of this section; and - (b) where the value of the dwelling-house occupied by the $\frac{1}{2}$ licensee as aforesaid in such area does not exceed such amount as may be prescribed. - (3) The Governor in Council may by order published in the Gazette declare that this section shall apply to any rent restriction area and thereupon this section shall apply to that area. - (4) An order made under the provisions of sub-section (3) of this section shall be laid before the Legislative Council. - (5) For the purposes of sub-section (1) of this section— - (a) "owner" includes any person, other than the licensee, who is or would be, but for the provisions of this section, entitled to possession of the land, and any person from time to time deriving title under the original owner; and - $(b)$ it shall be immaterial whether the permission given by the owner is express or implied, oral or in writing.'

It is common ground that no order has been made applying this section to Mwanza; but, in my opinion, it is immaterial to the construction of the Ordinance to consider whether this particular section has been applied to the area in which the building in question is situate.

In the judgment appealed from, the learned Judge, after setting out the definition of "let", says: $-$

"Section 2A provides, in effect and, inter alia, subject to exceptions, that where a lessee under a building lease builds a dwelling-house, the lessee shall be regarded as tenant of the house for purposes of the Ordinance. It is common ground that the premises which are the subject of this action are exclusively business premises, and neither in whole nor in part a<br>dwelling-house. Section 2A therefore, does not apply to them, and it follows that there is no reason to hold that these premises, built by defendant under a building lease, were 'let' to him. If they were not 'business premises let', they were not premises to which the Ordinance applies."

With deference, I find this reasoning inconclusive. The definition of "let" is not an exhaustive one; it merely adds to the usual connotation of the word two artificial extensions, and the question as to what constitutes a letting (or even a subletting) of premises is to be determined by the rules of the common law. Rent restriction legislation has to be construed against the background of the general law of landlord and tenant and whether a tenancy or some other relationship exists is a question of law to be decided on the facts proved: $Cole$ v. Lejeune (1951) 2 T. L. R. 308 at p. 311.

The first question, therefore, to be resolved in this appeal is whether at common law during the term of the lease, the appellant was the contractual tenant of the building as well as the tenant of the land, or whether some other relationship, such as licensee and licensor, existed between him and the lessor as regards the building. If the former was the case then, on the expiration of the lease, the appellant would be entitled to hold over as a statutory tenant of the building, although his interest in the land was extinguished: (without prejudice, however, to the respondent's claim to eject him as a non-occupying tenant).

Again, if the correct view is that at common law the appellant was contractual tenant of the building during the term of the lease, two subsidiary questions will arise $(a)$ as to whether his position as statutory tenant is affected by the provisions of section 2 (a) and (b) whether the premises were let as business premises.

On the first question there is a dearth of authority. Mr. Megarry in his book on the Rent Acts 7th (1953) Edition, p. 44 refers to an Irish High Court case in which it was held, in 1938, that the operation of the Irish rent restriction legislation was not excluded by reason of the house having been erected by the tenant under a building lease. Unfortunately the report cited is not available here; nor is the relevant legislation. Possibly the reason why no direct authority can be found in reported English cases is because the usual practice in England is for the parties to enter into an agreement for a building lease, under which the builder becomes entitled to have a lease of the land and buildings he has erected thereon on completion of the works: see Halsbury, 2nd Ed. Vol. XX, para. 365, p. 310 and Encyclopædia of Forms and Precedents 2nd Ed. Vol. 8, p. 243 et seq. The Encyclopædia, does, however, give (at pp. 288-293) a precedent of a building lease of a piece of land for a term of 99 years for the erection of a dwellinghouse. It may be noted that it contains an express covenant to surrender the demised land and the dwelling-house at the determination of the lease.

Mr. Murray, for the appellant, rested his case quite simply on the maxim quiequid plantatur solo, solo cedit. His argument was that the house when erected (it being conceded that it was of permanent construction) was annexed to and became part of the land which was let under the lease and became, therefore, included in the tenancy. There could not be, he argued, one sort of relationship between appellant and respondents as regards the land and another sort as regards the building: if the appellant was tenant of the land, he could not but be also the tenant of the building. In my view these arguments are correct in law and must prevail.

Mr. O'Donovan, for the respondents, contended that it was erroneous to import concepts of the law relating to real property into this matter: that the Rent Restriction Ordinance deals with entirely artificial conceptions of "premises" 'as defined. The res with which the Ordinance deals is not the land but the dwelling-house or business premises let, and in the instant case there was *ab initio* no letting of any building as between the parties.

I think much of Mr. O'Donovan's argument is incontrovertible but it applies only from the moment of time at which a statutory tenancy comes into existence. The interest of a contractual tenant is primarily with the land and the buildings on it, whereas the interest of a statutory tenant is in the building only: see Megarry op. cit. at p. 19 and 6. 196. The distinction is illustrated by the two cases of Simper v. Coombs (1948) 1 All E. R. 306 (contractual tenancy) and Ellis & Sons Amalgamated Properties Ltd. v. Sisman (1948) 1 K. B. 653 (statutory tenancy). It is true that under the form of lease made in the instant case there was *ab initio* no letting of the building because it was not then in existence, but, for the reason set out above, I think that the appellant did become tenant of the building so soon as it was erected. On the determination of his contractual tenancy by effluxion of time, he held over as statutory tenant of the premises.

On the question as to whether there was a letting for business purposes, Mr. O'Donovan argued that there was never any lease of the building for any particular purpose. That, of course, is true enough, but I think the law is, as<br>stated by Megarry op. cit. at p. 62, "where the tenancy agreement contemplated no specified use, then the actual use at the time when possession is sought by the landlord must be considered". See Wolfe v. Hogan (1949) 2 K. B. 194 at p. 203 (C. A.) It is also relevant to take into account that although the lease merely required the lessee to "erect buildings" on the land demised without any restriction or provision as to user, the buildings put up were in fact designed for use as shops and have (with the exception of the one store-room or office) always been used as such. I agree therefore with Mr. Murray that the landlord must be taken to have intended this. I conclude, therefore, that the premises are let to the appellant for business purposes.

I come then to the last question in this appeal which is the effect, if any, of section 2A, upon which Mr. O'Donovan strongly relied. His argument was that, whatever might have been the position of the appellant under the Ordinance before the enactment of section $2_A$ in 1954, that section, by an implied repeal, has deprived him of any protection he may have hitherto had. I want to put the argument as fully and fairly as I can because, for reasons which I will give presently, I cannot accept it. The argument is put thus: the wording of section $2<sub>A</sub>$ is apt to cover the case of a lessee under a building lease who has covenanted to erect a dwelling-house: he is called a licensee but, by the fiction enacted in the section, he is to be deemed a tenant and the ground-rent he pays for the land is to be deemed rent for the dwelling-house. The enactment of this special provision for lessees who have covenanted to build dwelling-houses, it is said, by implication excludes from the category of tenants the lessee who has covenanted to build buildings to be used for business purposes.

I cannot accept this argument because I am of the opinion that section $2A$ was not intended to apply, and cannot properly be applied to, any case of a tenancy created by a lease: I have already given my reasons for holding that the lessee under a building lease, drawn in the form of the one we have here to consider, becomes tenant of the building as soon as it is erected, and that is irrespective of whether the building is a dwelling-house or business premises. But assume that I am wrong, or that the Legislature, thinking the point dubious, wished to protect the lessee who had erected a dwelling-house: why should they go about it in such a devious and artificial manner? Building leases and ground rents are terms well known to every lawyer and what would have been easier than to enact simply that the holder of a building lease who had erected a dwelling-house should be deemed to be the tenant of the house and the groundrent paid under the lease deemed to be rent for the house?

In my opinion section 2A is not intended to cover any case where a tenancy exists. I believe it was intended to cover the type of case where the landowner merely gives a licence to occupy a "house-spot", as it is sometimes called, on which the licensee erects a house of semi-permanent construction. This type of licence is, in my experience, very common in many colonial territories. It exists in the Protectorate of Kenya and the licensees are protected by the Eviction of Tenants (Control) Ordinance, 1949 (No. 12 of 1949) as amended by Ordinance No. 60 of 1949. We were informed by Mr. Murray that it exists in some areas, particularly urban and semi-urban areas, in Tanganyika. Many peoples not accustomed to the common law have no difficulty in regarding land and the house on it as separate entities: it is, for example, well recognized in Mohammedan law. Among the peoples of East Africa many of their houses are not permanently attached to the soil, but can be either bodily removed or pulled down and removed without any great disturbance or any destruction of the soil. To my mind it is clear that the intention of section 2A was to protect such licensees against eviction or extortionate demands. This interpretation of section $2_A$ gives it, in my opinion, a common-sense meaning in harmony with the words used, and avoids the highly artificial construction which the respondents seek to put upon it.

I think I should add that I would accept the respondents' contention that there is an implied covenant in the lease to surrender up both the land and the building at the end of the term, but that covenant, in my opinion, cannot prevail against the Ordinance.

For these reasons, therefore, I would allow this appeal: I think that the High Court had no jurisdiction to entertain the suit. I would set aside the decree appealed from and remit the matter to the High Court with a direction that the suit be remitted to the Rent Restriction Board, Mwanza, for determination in accordance with the provisions of section 32 (3) of the Ordinance. In order to avoid any misunderstanding, I desire to state explicitly that I express no opinion at all on the question of fact as to whether the appellant is or is not a non-occupying tenant.

The appellant should have the costs of this appeal and of the proceedings. in the High Court.

SIR BARCLAY NIHILL (President).—I have read the judgment of the learned Vice-President, and for the reasons he has given I agree with him that the suit must be remitted to the Mwanza Rent Restriction Board. I also express no opinion as to whether in fact the appellant is occupying a portion of the suit premises. An order will be made in the terms proposed.

Lowe, J.-I have read the judgment of the learned Vice-President and the supporting judgment of the learned President, with both of which I agree. I have nothing to add but would make it clear that I also express no opinion as to whether the appellant is in fact occupying a portion of the suit premises.